Socioeconomic Decision-Making: Trade Unions

Trade unions have little direct effect on expenditure in the economy, since the funds at their disposal are small in relation to total national expenditure. They do, however, have a considerable impact on the wages of the unionised sector of the labour force, as, for example, US studies of the union-non-union wage differential demonstrate — somewhere between 5 and 25 per cent, depending upon the occupation, industry and other characteristics of the worker (Farber, 1986). Trade unions also exercise some control over the supply of labour (as well as its price) and therefore also over employment and unemployment. They are heavily involved, too, in bargaining with employers over a wide range of matters other than pay, such as pensions, physical conditions at the work place, health and safety arrangements, etc. As a last resort, if negotiations fail, they may also institute strikes as a means of bringing pressure to bear on employers. There is therefore a good case for looking at the operations of trade unions before we look at firms, since this will provide us with a better idea of individual goals within the organisational setting of a firm.